EXHIBIT 10.20
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MEMBERSHIP INTEREST PURCHASE AGREEMENT
THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "Agreement") is made
this ____ day of December, 1999, by and among Cavanaughs Hospitality
Corporation, a Washington corporation (the "Buyer"), October Hotel
Investors, LLC, a Washington limited liability company ("October") and
M and S Hotel LLC, a Washington limited liability company
("MS")(October and MS shall be referred to collectively herein as the
"Seller").
R E C I T A L S
A. Bellevue Inn, LLC ("Bellevue Inn") is a limited liability company
organized and existing under the laws of the state of Washington.
Bellevue Inn has three Members (as that term is defined in the
Bellevue Inn Operating Agreement (the "Operating Agreement")) with
the following ownership percentages: October - 25%; MS 25%; and
WestCoast Bellevue Inn, Inc., a Washington corporation ("WC
Bellevue") 50%.
B. WC Bellevue is a wholly owned subsidiary of WestCoast Hotels,
Inc., a Washington corporation ("WCH").
C. The shareholders of WCH are selling the stock of WCH (the "WCH
Sale") under the terms of a Stock Purchase Agreement (the "Stock
Purchase Agreement") by and among Buyer, ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and D. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (▇▇▇▇▇▇▇, ▇▇▇▇▇ and ▇▇▇▇▇▇
shall be collectively referred to herein as "WCH Sellers") dated
December 17, 1999. In exchange for their stock in WCH, the
shareholders will receive cash, corporate bonds and certain assets
of the Company. The WCH Sale will transfer indirect ownership of
fifty percent (50%) of Bellevue Inn to Buyer.
D. Under the terms and conditions of this Agreement, and conditioned
upon the closing of the transactions contemplated in, and as
defined in, the Stock Purchase Agreement ("Stock Purchase
Closing"), Buyer will acquire from Seller, and Seller sells to
Buyer the remaining fifty percent (50%) membership interest of
Bellevue Inn, which is all of Seller's ownership interest in
Bellevue Inn ("Bellevue Inn Interests").
NOW, THEREFORE, in consideration of the mutual promises herein made,
and in consideration of the representations, warranties, and covenants
herein contained, the parties agree as follows.
AGREEMENT
1. PURCHASE AND SALE OF STOCK. Seller hereby agrees to sell, assign
and convey to Buyer, and Buyer hereby agrees to purchase from
Seller, all of Seller's right, title and interest in the Bellevue
Inn Interests for a purchase price of Two Million Two Hundred and
Fifty Thousand Dollars and 00/100 ($2,250,000) (the "Purchase
Price"). The Purchase Price shall be paid as follows:
(a) One Million Two Hundred and Fifty Thousand Dollars
($1,250,000) in immediately available funds at Closing; and
(b) One Million Dollars ($1,000,000) in private bonds in the form
of Exhibit A to be delivered to Seller at Closing (the "Buyer
Bonds").
(c) Provided that all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby
have been satisfied or waived (other than conditions with
respect to actions the respective Parties will take at the
Closing itself), the closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the
offices of ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP/▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇.▇. in
Seattle, Washington simultaneously with the Stock Purchase
Closing. The effective date of the transaction described in
this Agreement ("Effective Date") shall be midnight of
December 31, 1999, whether or not Closing has occurred by
that date. In order to conveniently effectuate Closing, the
parties will cooperate to deposit all documents with Closing
Agent under binding delivery instructions by 5:00 p.m.
Seattle time on December 30, 1999 and arrange for the
transfer of all funds under binding delivery instructions by
5:00 p.m. Seattle time on Closing, but not earlier than
January 3, 2000. To the extent that all conditions to the
obligations of the Parties to consummate the transactions
contemplated hereby have not been satisfied or waived (other
than conditions with respect to actions the respective
Parties will take at the Closing itself), Closing shall be
delayed until such conditions have been satisfied without
modifying the Effective Date.
(d) All real estate excise taxes incurred in connection with this
Agreement, shall be allocated to Sellers and paid at Closing,
and the Parties agree to cooperate to file all necessary Tax
Returns and other documentation with respect to all such
transfer taxes and to join in the execution of any such Tax
Returns and other documentation.
2. REPRESENTATIONS AND WARRANTIES CONCERNING THE TRANSACTION.
(a) REPRESENTATIONS AND WARRANTIES OF OCTOBER. October
represents and warrants to the Buyer that the statements
contained in this Section 3(a) are correct and complete as of
the date of this Agreement.
(i) ORGANIZATION OF BELLEVUE INN. Bellevue Inn is a
limited liability company duly organized, validly
existing, and in good standing under the laws of the
State of Washington and has all requisite power and
authority to carry on its business and to own its
properties.
(ii) ORGANIZATION OF OCTOBER. October is a limited
liability company duly organized, validly existing,
and in good standing under the laws of the State of
Washington.
(iii) AUTHORIZATION. October has full power and authority to
execute and deliver this Agreement and to perform his
or its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation
of October, enforceable in accordance with its terms
and conditions. October need not give any notice to,
make any filing with, or obtain any authorization,
consent, or approval of any government or governmental
agency in order to consummate the transactions
contemplated by this Agreement which has not been
obtained as of the execution of this Agreement.
(iv) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (A) violate
any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which October is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which October is a party or by which it
is bound or to which any of its assets is subject.
(v) CAPITALIZATION OF BELLEVUE INN. As the date hereof,
October owns a twenty five percent (25%) membership
interest Bellevue Inn (the "October Interest").
(vi) INVESTMENT. October (A) understands that the Buyer
Bonds have not been, and will not be, registered under
the Securities Act, or under any state securities
laws, and are being offered and sold in reliance upon
federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the
Buyer Bonds solely for its own account for investment
purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial
matters, (D) has received certain information
concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding
the Buyer Bonds, (E) is able to bear the economic risk
and lack of liquidity inherent in holding the Buyer
Bonds, and (F) is an Accredited Investor.
(b) REPRESENTATIONS AND WARRANTIES OF MS. MS represents and
warrants to the Buyer that the statements contained in this
Section 3(b) are correct and complete as of the date of this
Agreement.
(i) ORGANIZATION OF BELLEVUE INN. Bellevue Inn is a
limited liability company duly organized, validly
existing, and in good standing under the laws of the
State of Washington and has all requisite power and
authority to carry on its business and to own its
properties.
(ii) ORGANIZATION OF MS. MS is a limited liability company
duly organized, validly existing, and in good standing
under the laws of the State of Washington.
(iii) Authorization. MS has full power and authority to
execute and deliver this Agreement and to perform his
or its obligations hereunder. This Agreement
constitutes the valid and legally binding obligation
of MS, enforceable in accordance with its terms and
conditions. MS need not give any notice to, make any
filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in
order to consummate the transactions contemplated by
this Agreement which has not been obtained as of the
execution of this Agreement.
(iv) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of
the transactions contemplated hereby, will (A) violate
any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental
agency, or court to which MS is subject or any
provision of its charter or bylaws or (B) conflict
with, result in a breach of, constitute a default
under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or
cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other
arrangement to which MS is a party or by which it is
bound or to which any of its assets is subject.
(v) CAPITALIZATION OF BELLEVUE INN. As the date hereof,
MS owns a twenty five percent (25%) membership
interest in Bellevue Inn (the "MS Interest").
(vi) GOOD TITLE AND NO CLAIMS. MS has good title to the MS
Interest, there are no claims, liens or encumbrances
which can lawfully be made against the MS Interest, MS
is transferring title to the MS Interest to Buyer free
and clear of any claims, liens, encumbrances, pledges
or options.
(vii) INVESTMENT. MS (A) understands that the Buyer Bonds
have not been, and will not be, registered under the
Securities Act, or under any state securities laws,
and are being offered and sold in reliance upon
federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the
Buyer Bonds solely for its own account for investment
purposes, and not with a view to the distribution
thereof, (C) is a sophisticated investor with
knowledge and experience in business and financial
matters, (D) has received certain information
concerning the Buyer and has had the opportunity to
obtain additional information as desired in order to
evaluate the merits and the risks inherent in holding
the Buyer Bonds, (E) is able to bear the economic risk
and lack of liquidity inherent in holding the Buyer
Bonds, and (F) is an Accredited Investor.
(c) REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer
represents and warrants to the Seller that the statements
contained in this Section 3(c) are correct and complete as of
the date of this Agreement.
(i) ORGANIZATION OF THE BUYER. The Buyer is a corporation
duly organized, validly existing, and in good standing
under the laws of the State of Washington and has all
requisite power and authority to carry on its business
and to own its properties.
(ii) INVESTIGATION AND ACCESS. Buyer has the necessary
knowledge and experience in financial and business
matters, and in particular, the hotel industry, to
evaluate the merits and risks of the purchase of the
Bellevue Inn Interests under the terms of this
Agreement, and Buyer has relied upon its own knowledge
and investigation of Bellevue Inn, and not upon any
representations or warranties made by Seller except as
set forth in this Agreement. Buyer further represents
that prior to the execution of this Agreement, Buyer
and Buyer's advisers (including financial, accounting
and other advisers) had the opportunity to review the
books and records of Bellevue Inn and to ask questions
and receive answers from Seller and authorized
representatives of Bellevue Inn concerning Bellevue
Inn and purchase of the Bellevue Inn Interests.
(iii) INVESTMENT REPRESENTATION. Buyer represents and
warrants that it is engaging in the transactions
described in this Agreement for its own account, for
investment purposes only, and not with a view to the
resale or distribution of the Bellevue Inn Interests
purchased and assigned hereunder. Buyer acknowledges
that the Bellevue Inn Interests have not been
registered under the Securities Act of 1933, as
amended, or any state securities law.
(iv) AUTHORIZATION. This Agreement is valid and legally
binding on Buyer in accordance with its terms.
Neither the execution or delivery of, nor the
performance of or compliance with this Agreement will,
with or without the giving of notice or passage of
time, result in any breach of, or constitute a default
under, or result in the imposition of any lien or
encumbrance upon any asset or property of Buyer and
will not violate the Articles of Incorporation or
Bylaws of Buyer.
3. INDEMNIFICATION.
(a) INDEMNIFICATION IN FAVOR OF BUYER. Each of October and MS,
severally and not jointly, agree to indemnify, defend and
hold harmless Buyer from and against, and in respect of, any
and all claims, losses, damages, expenses (including, without
limitation, settlement costs and any legal or other expenses
for investigating or defending any actions or threatened
actions), costs, obligations and liabilities arising out of
any breach by either MS or October, as applicable, of
Sections 1 or 2 of this Agreement.
(b) INDEMNIFICATION IN FAVOR OF SELLER. Buyer agrees to
indemnify, defend and hold harmless Seller from and against,
and in respect of, any and all claims, losses, damages,
expenses (including, without limitation, settlement costs and
any legal or other expenses for investigating or defending
any actions or threatened actions), costs, obligations and
liabilities arising out of any breach by Buyer of Sections 1
or 2 of this Agreement.
(C) MATTERS INVOLVING THIRD PARTIES. If any third party shall
notify any party (the "Indemnified Party") with respect to
any matter which may give rise to a claim for indemnification
(a "Claim") against any other party (the "Indemnifying
Party") under this Section 4, then the Indemnified Party
shall, within five business days after receiving notice,
notify each Indemnifying Party thereof in writing. Any
Indemnifying Party will have the right at any time to assume
and thereafter conduct the defense of the Claim with counsel
of its choice; provided, however, that the Indemnifying Party
will not consent to the entry of any judgment or enter into
any settlement with respect to the Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably) unless the judgment or proposed settlement
involves only the payment of money damages and does not
impose an injunction or other equitable relief upon the
Indemnified Party. Unless and until an Indemnifying Party
assumes the defense of the Claim, as provided herein, the
Indemnified Party may defend against the Claim in any manner
it reasonably deems appropriate. In no event, however, will
the Indemnified Party consent to the entry of any judgment or
enter into any settlement with respect to the Claim without
the prior written consent of each of the Indemnifying
Parties. The Parties shall cooperate with each other in
regard to the defense against any such Claims.
(d) LIMITATION. The indemnification obligations of October and
MS under this Section 4 shall be several and not joint and
the total liability of each shall be limited to the total
consideration it has received under the terms of this
Agreement. October and MS hereby agree that any indemnity
obligation hereunder owing to Buyer may be collected by Buyer
through any legal means.
4. CONDITIONS.
(a) The obligation of the Buyer hereto to consummate the
transaction contemplated in this Agreement is subject to the
fulfillment at or prior to the Closing of each of the
following conditions:
(i) The closing of the transactions contemplated in, and
as defined in, the Stock Purchase Agreement.
(ii) This Agreement and the transactions contemplated
hereby shall have been duly approved by the Board of
Directors of Buyer in accordance with the applicable
provisions of Washington law and its Articles of
Incorporation and Bylaws.
(iii) The representations and warranties set forth in
Section 3(a) and Section 3(b) above shall be true and
correct in all material respects at and as of the
Closing;
(iv) The Sellers shall have performed and complied with all
of their covenants hereunder in all material respects
through the Closing;
(v) No action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction
or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement
to be rescinded following consummation, (C) affect
adversely the right of the Buyer to own an equity
interest in Bellevue Inn, or (D) affect materially and
adversely the right of any Bellevue Inn to own its
assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(vi) Each Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 6(a)(iii)-(v) is satisfied
in all respects;
(vii) the Buyer shall have received from counsel to each of
the Sellers an opinion addressed to the Buyer, and
dated as of the Closing, which includes statements
that such Seller has the power to enter into the
Agreement and that the execution of the Agreement by
the representative of the Seller has been authorized
by all necessary action.
(b) The obligation of each Seller to consummate the transaction
contemplated in this Agreement is subject to the fulfillment
at or prior to the Closing of each of the following
conditions:
(i) The closing of the transactions contemplated in, and
as defined in, the Stock Purchase Agreement.
(ii) The representations and warranties set forth in
Section 3(c) above shall be true and correct in all
material respects at and as of the Closing;
(iii) The Buyer shall have performed and complied with all
of their covenants hereunder in all material respects
through the Closing;
(iv) No action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency
of any federal, state, local, or foreign jurisdiction
or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the
transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement
to be rescinded following consummation.
(v) Each Seller shall have delivered to the Buyer a
certificate to the effect that each of the conditions
specified above in Section 6(b)(ii)-(iv) is satisfied
in all respects.
(vi) Delivery by Buyer to Sellers of an aggregate of One
Million Two Hundred Fifty Thousand Dollars
($1,250,000) in immediately available funds; and
(vii) Delivery by Buyer to Sellers of the Buyer Bonds.
5. MISCELLANEOUS.
(a) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the
parties and their respective successors and permitted
assigns.
(b) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement among
the parties and supersedes any prior understandings,
agreements, or representations by or among the parties,
written or oral, to the extent they have related in any way
to the subject matter hereof.
(c) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party
may assign either this Agreement or any of his or its rights,
interests, or obligations hereunder without the prior written
approval of the Buyer and the Seller.
(d) AMENDMENT. This Agreement may be amended by the parties in
writing.
(e) POST-CLOSING COVENANTS. In case at any time after the
closing any further action is necessary or desirable to carry
out the purposes of this Agreement, each of the parties will
take such further action (including the execution and
delivery of such further instruments and documents) as any
other party reasonably may request, all at the sole cost and
expense of the requesting party. In addition, Seller shall
make Bellevue Inn's books and records available to Buyer
and/or Buyer's authorized agent, for review, upon reasonable
request.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but
all of which together will constitute one and the same
instrument.
(g) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any
way the meaning or interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder
shall be deemed duly given if (and then two business days
after) it is sent by hand delivery, personal service,
registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as
set forth below:
If to October: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
_____________________
_____________________
If to MS: M & S Hotel LLC
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
If to the Buyer: Cavanaughs Hospitality Corporation
▇▇▇ ▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Corporate Counsel
Any party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at
the address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party
may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be
delivered by giving the other parties notice in the manner
herein set forth.
(i) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State
of Washington without giving effect to any choice or conflict
of law provision or rule (whether of the State of Washington
or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of
Washington.
(j) ARBITRATION. Any dispute arising out of or relating to this
Agreement or any breach hereof shall be settled by panel of
three arbitrators, with each side to the dispute selecting an
arbitrator and those two arbitrators selecting a third
neutral arbitrator in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and
judgement upon any award rendered may be entered in any court
having jurisdiction thereof. Arbitration proceedings
hereunder shall be held in Seattle, Washington. In addition
to all other relief, the substantially prevailing party in
any arbitration or court action shall be entitled to its or
their reasonable attorneys' fees and costs incurred by reason
of the dispute (including any appellate review and bankruptcy
or enforcement proceedings) and the substantially losing
party shall pay all fees and costs of the arbitrators and
arbitration. Notwithstanding anything to the contrary
herein, this Section shall in no way prevent either party
from seeking equitable relief as set forth in Section 6(k),
below.
(k) SPECIFIC PERFORMANCE. Each of the Parties acknowledges and
agrees that the other Parties would be damaged irreparably in
the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or
otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties shall be entitled to an
injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action
instituted in any court of the United States or any state
thereof having jurisdiction over the Parties and the matter
(subject to the provisions set forth in Section 6(l) below),
in addition to any other remedy to which they may be
entitled, at law or in equity.
(l) SUBMISSION TO JURISDICTION. Subject to the provisions of
Section 6(j), above, each of the Parties submits to the
jurisdiction of any state or federal court sitting in
Seattle, Washington in any action or proceeding arising out
of or relating to this Agreement and agrees, subject to the
provisions of Section 6(j), above, that all claims in
respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to
bring any action or proceeding arising out of or relating to
this Agreement in any other court. Each of the Parties
waives any defense of inconvenient forum to the maintenance
of any action or proceeding so brought and waives any bond,
surety, or other security that might be required of any other
Party with respect thereto. Any Party may make service on
any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the
manner provided
for the giving of notices in this Agreement. Nothing in this
Section 11(l), however, shall affect the right of any Party
to serve legal process in any other manner permitted by law
or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may
be enforced by suit on the judgment or in any other manner
provided by law or at equity
(m) SEVERABILITY. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any
jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity
or enforceability of the offending term or provision in any
other situation or in any other jurisdiction.
(n) EXPENSES. The parties will bear their own costs and expenses
(including legal fees and expenses) incurred in connection
with this Agreement and the transactions contemplated hereby.
(o) ATTORNEYS' FEES AND COSTS. If either party institutes legal
proceedings to settle any controversy arising under this
Agreement, the prevailing party in the action shall be
entitled to recover its reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
BUYER: SELLER:
CAVANAUGHS HOSPITALITY CORPORATION OCTOBER HOTEL INVESTORS, LLC
By: ______________________________ By: __________________________
Its: Authorized Officer Its: _________________________
M AND S HOTEL LLC
By: __________________________
Its: _________________________
EXHIBIT A
Form of Bond
THIS INSTRUMENT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY NOT
BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR OTHERWISE
TRANSFERRED UNLESS (A) THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY
SUCH TRANSACTION, (B) CAVANAUGHS RECEIVES AN OPINION OF LEGAL COUNSEL
FOR THE HOLDER OF THE INSTRUMENT (CONCURRED IN BY LEGAL COUNSEL FOR
CAVANAUGHS) STATING THAT SUCH TRANSACTION IS EXEMPT FROM REGISTRATION,
OR (C) CAVANAUGHS OTHERWISE SATISFIES ITSELF THAT SUCH TRANSACTION IS
EXEMPT FROM REGISTRATION.
CAVANAUGHS HOSPITALITY CORPORATION
CONVERTIBLE BOND
$_______________ Spokane, Washington
__________ __, 2000
FOR VALUE RECEIVED, the undersigned, CAVANAUGHS HOSPITALITY
CORPORATION, a Washington corporation ("Cavanaughs"), hereby promises
to pay to the order of ____________________________________ or any
successor holder of this instrument as described in Section 7 (the
"Holder"), at _______________________ or such other place as the
Holder may designate by written notice to Cavanaughs, the principal
sum of _________________________ ($___________), with interest, as
provided herein.
6. INTEREST; PAYMENTS. Interest on the outstanding principal balance
hereunder shall accrue at the rate of seven percent (7%) per annum
from the date hereof. Subject to earlier payment or conversion
according to the terms hereof, the principal balance of this
instrument, together with accrued interest thereon, shall be paid
in 120 equal monthly installments of $______________ on the _____
day of each month, beginning on ____________, 2000 and ending on
____________, 2009. An amortization schedule for the payments due
under this instrument is attached hereto as Appendix A.
7. PREPAYMENT. Cavanaughs may at any time (subject to prior
conversion in accordance with Section 4) prepay all or any portion
of the principal and accrued interest owing under this instrument,
without fee or penalty, upon thirty (30) days' prior written
notice to the Holder.
8. EVENTS OF DEFAULT. If any of the following events (herein
individually referred to as an "Event of Default") shall occur,
the Holder may, at any time during the period in which the Event
of Default is continuing, declare the entire principal and unpaid
accrued interest hereof immediately due and payable, by notice in
writing to Cavanaughs:
(a) Default in payment when due of any principal or accrued
interest owing under this instrument, if such default is not
cured by Cavanaughs within ten (10) days after the Holder has
given Cavanaughs written notice of such default; or
(b) The institution by Cavanaughs of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to
institution of bankruptcy or insolvency proceedings against
it or the filing by it of a petition or answer or consent
seeking reorganization or release under the federal
Bankruptcy Act, or any other applicable federal or state law,
or the consent by it to the filing of any such petition or
the appointment of a receiver, liquidator, assignee, trustee
or other similar official of Cavanaughs, or of any
substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the taking of
corporate action by Cavanaughs in furtherance of any such
action; or
(c) If, within sixty (60) days after the commencement of an
action against Cavanaughs (and service or process in
connection therewith on Cavanaughs) seeking any bankruptcy,
insolvency, reorganization, liquidation, dissolution or
similar relief under any present or future statute, law or
regulation, such action shall not have been resolved in favor
of Cavanaughs or all orders or proceedings thereunder
affecting the operations or the business of Cavanaughs
stayed, or if the stay of any such order or proceeding shall
thereafter be set aside, or if, within sixty (60) days after
the appointment without the consent or acquiescence of
Cavanaughs of any trustee, receiver or liquidator of
Cavanaughs or of all or any substantial part of the
properties of Cavanaughs, such appointment shall not have
been vacated.
9. CONVERSION. The Holder may at any time prior to payment in full
of the principal and accrued interest owing under this instrument,
upon five (5) days prior written notice to Cavanaughs, convert all
or any portion of such principal and interest (the "Conversion
Amount") into shares of Common Stock of Cavanaughs as follows:
the Conversion Amount may be converted into that number of shares
of Common Stock equal to the quotient obtained by dividing the
Conversion Amount by Fifteen Dollars ($15.00), as such amount
shall be proportionately adjusted to take into account any change
in the number or class of Cavanaughs Common Stock by reason of a
reclassification, recapitalization, split-up, combination,
exchange of shares, stock dividend, subdivision or combination of
the Common Stock of Cavanaughs (the "Conversion Price"); provided,
however, that (a) the Conversion Amount shall be an integral
multiple of the Conversion Price, and (b) at the time of any
conversion, the Holder shall be an "accredited investor" (as such
term is defined in Regulation D promulgated under the Securities
Act of 1933, as amended). Cavanaughs shall at all times reserve
and keep available out of its authorized but unissued shares of
Common Stock, solely for the purpose of effecting the conversion
pursuant to this Section 4, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the
conversion pursuant to this Section 4.
EFFECT OF CONVERSION. Upon conversion in accordance with
Section 4 of all or any portion of the principal and accrued
interest owing under this instrument:
(a) CONVERSION DATE. Such conversion shall be deemed to occur on
the date that is five (5) business days after written notice
of conversion is received by Cavanaughs (the "Conversion
Date").
(b) Certificates On the Conversion Date or as soon as practicable
thereafter, Cavanaughs shall issue and deliver to the Holder
a certificate or certificates for the number of shares of
stock to which the Holder shall be entitled. The Holder
shall be treated for all purposes as the record holder of
such stock on the Conversion Date.
(c) SATISFACTION OF INSTRUMENT. ▇▇▇▇▇▇▇▇▇'▇ issuance of shares
of stock to the Holder upon conversion of the Conversion
Amount pursuant to the terms of this instrument shall
constitute satisfaction in full of ▇▇▇▇▇▇▇▇▇'▇ obligation to
pay the Conversion Amount, and the portion of this instrument
represented by the Conversion Amount shall thereafter be of
no further force or effect.
10. GOVERNING LAW. This instrument shall be governed by and
interpreted in accordance with the laws of the State of Washington
without regard to principles of conflict of laws.
11. SEVERABILITY. If any part of this instrument is determined to be
illegal or unenforceable, all other parts shall remain in full
force and effect.
12. TRANSFERABILITY. Neither this instrument nor any rights hereunder
may be transferred by the Holder without the consent of
Cavanaughs, except that the Holder may assign this instrument to
any "accredited investor" (as such term is defined in Regulation D
promulgated under the Securities Act of 1933, as amended).
13. COLLECTION COSTS BORNE BY CAVANAUGHS. Cavanaughs agrees to pay
all costs and expenses, including without limitation reasonable
attorneys' fees, incurred by the Holder in any action brought to
enforce the terms of this instrument and/or to collect this
instrument, and in any appeal thereof.
14. MISCELLANEOUS.
(a) No delay or omission on the part of the Holder in exercising
any right under this instrument shall operate as a waiver of
such right or of any other right under this instrument.
(b) Cavanaughs hereby waives presentation for payment, demand,
notice of demand and of dishonor and non-payment of this
instrument, protest and notice of protest, diligence in
collecting, and the bringing of suit against any other party.
The pleading of any statute of limitations as a defense to
any demand against Cavanaughs, any endorsers, guarantors and
sureties of this instrument is expressly waived by each and
all of such parties to the extent permitted by law. Time is
of the essence under this instrument.
(c) All notices to Cavanaughs under this instrument shall be in
writing and shall be deemed to be given to Cavanaughs (i)
upon delivery of the notice in person; (ii) three (3) days
after deposit, at a U.S. Post Office or in a regularly
maintained U.S. Postal Service letter box, of a letter
containing the notice sent by first-class mail with postage
prepaid, (iii) one (1) day after delivery of a package
containing the notice to an overnight receipted courier
service, or (iv) delivery of the notice via a confirmed
facsimile transmission. Notices shall be given to Cavanaughs
at its address or facsimile number listed in the signature
block below or at such other address or facsimile number as
Cavanaughs may hereafter specify in writing to the Holder.
(d) Any payment hereunder shall first be applied to any
collection costs, then against accrued and unpaid interest
hereunder and then against the outstanding principal balance
of this instrument.
IN WITNESS WHEREOF, Cavanaughs has caused this instrument to be signed
in its corporate name by its duly authorized officer and dated the day
and year first above written.
CAVANAUGHS HOSPITALITY CORPORATION
By:
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Its:
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
